Question : What is the purpose of a debt ceiling?
Option 1: To limit the amount of debt that the government can incur
Option 2: To limit the amount of spending that the government can authorize
Option 3: To limit the amount of revenue that the government can collect
Option 4: To limit the amount of deficit spending that the government can engage in
Correct Answer:
To limit the amount of debt that the government can incur
Solution : The correct answer is (a). To limit the amount of debt that the government can incur.
A debt ceiling is a legal limit set by the government on the amount of national debt that can be issued and outstanding at any given time. It restricts the total amount of money the government can borrow to finance its operations and obligations. The debt ceiling serves as a mechanism to control and monitor the level of debt and ensure that the government does not exceed a certain threshold.
When the government reaches the debt ceiling, it cannot borrow more money unless authorized by Congress to increase the limit. This limitation is intended to promote fiscal discipline and force policymakers to address the country's long-term fiscal situation.
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